Mudajaya price may be driven by cheap valuation, speculation

by **hlk** Thu 12 Jan 2012, 13:40

PETALING JAYA: Analysts think cheap valuations and speculation on
soon-to-be-awarded construction contracts may be behind the recent surge
in Mudajaya Group Bhd's share price and volume.
OSK analyst Jeremy Goh told StarBiz
that Mudajaya was undervalued and one of the cheapest construction
stocks, which might have fuelled the steep increase in its trading
volume to 9.18 million shares yesterday.
Mudajaya shares gained
17 sen, or 7.33%, to RM2.49 while its CG and CF warrants added 2.5 sen
to 6.5 sen and one sen to two sen respectively. Both warrants were on
the volume list, with 42.16 million shares of the CG and 18.86 million
of the CF traded.
On Tuesday, trading in the counter swelled 13-fold to 4.45 million shares from just 338,300 the day before.
When
contacted, a Mudajaya official said the company was not aware of any
development that might have led to the upswing in its stock.
OSK's Goh said there was talk that Mudajaya could soon win contracts for Malakoff Corp Bhd's 1,000MW Tanjung Bin power plant and the West Coast Expressway.
He added that although IJM Corp Bhd was the main contractor for the West Coast Expressway, Mudajaya could be expected to bag some sub-contracting jobs.
Another
bank-backed analyst said he believed the expressway contract would not
come so quickly, but that Mudajaya's sound fundamentals, coupled with
its valuations and upside based on forthcoming projects, made the stock
compelling.
CIMB
Equities Research has a technical buy on Mudajaya at RM2.32, where it
is trading at a financial year 2013 price-to-earnings ratio of 3.9 times
and price-to-book ratio of 1.4 times. It reckoned that the shares might
have built a base near RM2.13.
“As long as this level continues to hold steady, we think the risk-reward ratio favours the bulls.
“Hence, we advocate traders to take some position here,” it said in a report.
In
a client note on Tuesday, CIMB Research analyst Sharizan Rosely said
Mudajaya's management had indicated that the pending award of the
RM700mil-RM800mil civil works for the extension of the Tanjung Bin plant
should boost its local job wins to over RM1bil.
Mudajaya is also
among the 14 contractors pre-qualified for the mass rapid transit
Sungai Buloh-Kajang line and is looking at precast opportunities for the
elevated portion.